RH (NYSE:RH) Shocks and Shorts React

RH (NYSE:RH)

Heavily-shorted Restoration Hardware announced a $300 million buy-back, reported Q4 2016 earnings and beat expectations by $0.03 – $0.68 vs $0.65. Revenues were reported down 8.8% YoY but that figure also beat expectations by $6.68 million. For 2016, the company reported profit of $4.7 million, or $0.12/share. Revenue was reported at $2.13 billion. The results in the share price have been dramatic and possibly due to short covering – RH is up over 25% at the time of this writing and had been up over 30%.

Corte Madera, CA-based RH (NYSE:RH) offers furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and child and teen furnishings. The company sells products through its stores and catalogs, as well as through its Websites, such as restorationhardware.com, rh.com, rhbabyandchild.com, rhteen.com, and rhmodern.com. As of October 29, 2016, it operated 85 retail galleries that include 51 legacy galleries, 6 larger format design galleries, 7 next generation design galleries, 1 RH modern gallery, and 5 RH baby & child galleries throughout the United States and Canada; 15 Waterworks showrooms in the United States and the United Kingdom; and 28 outlet stores.

In December, RH was trading in the $39 handle then provided guidance lower based on weak holiday sales. That precipitated a slide that ended in early February with RH shares trading in the $24 handle. For the previous month RH (NYSE:RH) is down over 10% and down over 28% for the quarter. However the earnings report today set off trading in volumes over eight times their daily average and shares are trading over 35% above their February lows.

RH (NYSE:RH) sales have steadily improved each year since 2012 when they reported $960 million. By 2016 that number improved to $2.11 Billion. EPS has also improved since 2013 when the company reported a loss of $0.40. In 2016 EPS was a profit of $2.27. Of the thirteen forms that follow RH (NYSE:RH), ten give the shares a rating of “Hold” but three rate the shares as a “Strong Buy”.

2/24/2017
Ticker Symbol RH
Last Price a/o 1:11 PM EST  $                    31.94
Average Volume                2,160,000
Market Cap (mlns)  $              1,040.00
Sales (mlns) $2,200.00
Shares Outstanding (mlns) 41.35
Share Float (mlns) 38.37
Shortable Yes
Optionable Yes
Inside Ownership 0.00%
Short Float 40.77%
Short Interest Ratio 7.24
Quarterly Return -28.05%
YTD Return -17.95%
Year Return -51.48%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.

 

Community Health Systems, Inc. (NYSE:CYH) Stuns Analysts

Community Health Systems, Inc. (NYSE:CYH)

Shares of Community Health Systems, Inc. (NYSE:CYH) are up over 30% on the back of the company’s earnings release and an analyst upgrade. Last Friday CYH shares closed at $6.90, gapped up to open Tuesday trading at $8.60, then reached a high of $9.69 before pulling back to trade around $9 in mid-day trading.

Community Health Systems, Inc. (NYSE:CYH) is an operator of general acute care hospitals. The organization’s affiliates own, operate or lease 158 hospitals in 22 states with approximately 27,000 licensed beds. Based on the unique needs of each community served, these hospitals offer a wide range of diagnostic, medical and surgical services in inpatient and outpatient settings.

Community Health Systems, Inc. (NYSE:CYH) reported adjusted earnings of $0.46/share for Q4 2016 – the street was expecting a figure closer to $0.13. Cash flow from operations was $327 million, compared with $306 million for the same period in 2015, representing a 6.9% increase.

Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., (NYSE:CYH) said, “We concluded the year with solid results in the fourth quarter, including sequential improvements in same-store net operating revenue, adjusted EBITDA and cash flow from operations. Significant progress has been made in our work to divest certain hospitals and other operations, enabling a reduction in our debt and the opportunity to reshape our portfolio into a stronger, more sustainable organization.”

Yesterday, Mizuho Securities upgraded their rating on CYH from “Underperform” to “Neutral” and assigned a price target of $7.50 – about $1 below current trading levels. In all, eighteen firms follow Community Health Systems, Inc., (NYSE:CYH). Two rate the shares as a “Strong Buy”, twelve rate CYH as a “Hold”, and three rate the shares as a “Sell”.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

 

2/21/2017
Ticker Symbol CYH
Last Price a/o 12:07 PM EST  $                      8.93
Average Volume                3,180,000
Market Cap (mlns)  $                  809.50
Sales (mlns) $1,877.00
Shares Outstanding (mlns) 117.32
Share Float (mlns) 109.23
Shortable Yes
Optionable Yes
Inside Ownership 0.20%
Short Float 20.45%
Short Interest Ratio 7.03
Quarterly Return 25.45%
YTD Return 23.43%
Year Return -42.82%

James Marion is a University of Houston student studying Business with a concentration in Finance.

 

 

Digital Globe, Inc. (NYSE:DGI) Subject of Take-Over Rumors

Digital Globe, Inc. (NYSE:DGI)

On Friday, Digital Globe, Inc. (NYSE:DGI) gained over 20% in inter-day trading on over 10 times DGI’s average daily volumes. Speculators jumped on rumors that the Westminster, CO-based firm is in talks to be acquired by Canadian satellite company MacDonald Dettwiler (MDA). Dow Jones news services reported at the market close that sources familiar with the negotiations had confirmed the rumors – setting up what will surely be a focus for many traders Tuesday morning. The deal is rumored to be in the $2-$3 billion range. Digital Globe, Inc. (NYSE:DGI) has a current market cap of just under $2 billion.

Digital Globe, Inc. (NYSE:DGI) owns a constellation of orbiting satellites that the company uses to provide geographic imaging to governments and industries worldwide – from environmental monitoring and mapmaking to defense and public safety. MDA’s satellite business is focused primarily in the communications, surveillance, and intelligence sectors. In addition, the company conducts a significant amount of advanced technology development.

Through their satellite constellation, MDA offers space-based communication solutions for cost-efficient global delivery of direct-to-home television, satellite radio, broadband internet, and mobile communications.

Analysts have a consensus price target of $38 for Digital Globe, Inc. (NYSE:DGI) – $3 higher than Friday’s close. Two analysts rate DGI shares as a “Strong Buy”, one rates the shares as a “Buy” and three rate DGI as a “Hold”. Sales have been trending upwards since 2011 when Digital Globe, Inc. (NYSE:DGI) posted a figure of $339.5 million and in 2015 that figure improved to $702.4 million. Digital Globe, Inc. (NYSE:DGI) trades with a 56 P/E ratio. That is well above the P/E ratio of 21 of the iShare U.S, Aerospace & Defense ETF.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

 

Deal Over! Unilever PLC (ADR) (NYSE:UL) Fends Off Kraft Heinz Company (NASDAQ:KHC)

Unilever PLC (ADR) (NYSE:UL)

The Kraft Heinz Company (NASDAQ:KHC) has ended their attempt to acquire Unilever PLC (ADR) (NYSE:UL). The $143 billion deal amounted to $50/share for UL when it was trading around $42 – almost a 20% premium. Kraft’s proposal included $30.23 per share in cash, payable in U.S. dollars, and 0.222 of a share in a new enlarged entity per Unilever share. The proposed acquisition would have been the third-largest acquisition in history, the largest ever acquisition of a UK-based company, and the largest ever in the food & beverage category.

A Kraft Heinz Company (NASDAQ:KHC) spokesperson commented “Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value.”

Industry observers are hinting that Unilever’s quick rejection of Kraft Heinz Company (NASDAQ:KHC) offer, and Kraft’s quick withdrawing of their offer suggest a strategy that was not completely thought through.

Interestingly, there was a massive spike in call options on shares of Unilever PLC (ADR) (NYSE:UL) – on Wednesday, February 15, 2017. That is two days before the deal hit the newswires.

When news of the proposed takeover hit the street, volumes exploded. Unilever PLC (ADR) (NYSE:UL) shares traded over 18 times their normal daily average volumes and Kraft Heinz Company (NASDAQ:KHC) traded over 10 times its normal average daily volumes as traders sought to arbitrage the deal’s pricing.

With news that Unilever PLC (ADR) (NYSE:UL) has successfully rejected the deal, activity in these two stocks is certain to dominate trading when the market opens on Tuesday.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

Arista Networks, Inc. (NYSE:ANET) Fails to Buck Trend

Arista Networks, Inc. (NYSE:ANET)

Arista Networks, Inc. (NYSE:ANET) closed Thursday at $100.17 and gapped up to open at $111.00. ANET hit a high of $119.45 before retreating back down to $117.34 at 3:15 PM EST. Volumes were eight times the average daily volume. The catalyst was the release of Q4 earnings which showed marked improvement.

Santa Clara, CA-based Arista Networks, Inc. (NYSE:ANET) develops and commercializes cloud networking solutions globally. The networking solutions include operating systems, network applications, and gigabit Ethernet switches. It also offers technical support services. Its customers include internet companies, service providers, financial services organizations, government agencies, media, and entertainment companies. Arista Networks, Inc. (NYSE:ANET) markets its products through its own direct sales force and augments their efforts through distributors, value-added resellers, systems integrators, and original equipment manufacturer partners.

Arista Networks, Inc. (NYSE:ANET) 4th quarter results included revenue of $328.0 million, an increase of 33.6% compared to the fourth quarter of 2015, and an increase of 13.0% from the third quarter of 2016. Non-GAAP net income of $77.5 million, or $1.04 per diluted share (average street estimates were $0.80), compared to non-GAAP net income of $57.5 million, or $0.80 per diluted share, in the fourth quarter of 2015. Year-end results included revenue of $1.1 billion, an increase of 34.8% compared to fiscal year 2015 and non-GAAP net income of $241.4 million or $3.30 per diluted share, compared to non-GAAP net income of $174.2 million, or $2.44 per diluted share, in fiscal year 2015. Arista Networks, Inc. (NYSE:ANET) gave Q1 2017 revenue guidance between $320-$330 million well above expectations of $305 million.

The positive earnings report continues the trend. Arista Networks, Inc. (NYSE:ANET) sales were $139.8 in 2011 and continued to increase yearly – in 2015 the company posted sales of $837.6 million. In 2012 EPS for ANET shareholders was $0.39 and that figure increased annually – in 2015 Arista Networks, Inc. (NYSE:ANET) posted an EPS of $1.81.

Arista Networks, Inc. (NYSE:ANET) is followed by eighteen firms. Nine rate ANET shares as a “Strong Buy”, one each rates the shares a “Buy” and an “Underperform”, and the remaining seven rate the shares a “Hold”. Their consensus price target is $100 – well below current trading levels.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

2/17/2017
Ticker Symbol ANET
Last Price a/o 3:21 PM EST  $                  117.38
Average Volume                    728,800
Market Cap (mlns)  $              6,960.00
Sales (mlns) $1,050.00
Shares Outstanding (mlns) 69.52
Share Float (mlns) 43.63
Shortable Yes
Optionable Yes
Inside Ownership 0.40%
Short Float 9.41%
Short Interest Ratio 5.63
Quarterly Return 14.10%
YTD Return 3.51%
Year Return 72.26%

Timken Steel Corporation (NYSE:TMST) Gaps Up on Financial Release

Timken Steel Corporation (NYSE:TMST)

Timken Steel Corporation (NYSE:TMST) closed Thursday at $17.72 and gapped up this morning to open at $19.37 – a 9.4% gain. Volumes are over five times their normal daily averages.

History

Canton, OH Timken Steel Corporation (NYSE:TMST) was founded in 1898 by Henry Timken in St. Louis, MO. The company moved to Canton, OH in 1901 to take advantage of the exploding automobile industry I nearby Detroit, MI.

In 2014 the company changed its corporate structure, the roller bearing producing part of the company was separated from the steel producing part of the company, resulting in two separate companies. The Timken Company continues to manufacture roller bearings, while TimkenSteel produces steel.

The Numbers

Yesterday Timken Steel Corporation (NYSE:TMST) reported fourth-quarter net sales of $214.7 million and a net loss of $67.0 million or minus $1.52 per share. This compares with net sales of $206.6 million and a net loss of $13.8 million or -$0.31/share compared to the same quarter last year. Net sales of $213.8 million and a net loss of $22.2 million or -$0.50/share in the third quarter of 2016. For the full year, net sales were $869.5 million and net loss was $105.5 million or -$2.39 per share. This compares with net sales of $1,106.2 million and a net loss of $45.0 million or -$1.01 per share for full-year 2015.

Timken Steel Corporation (NYSE:TMST) sales and earnings have been declining. In 2011 sales were a reported $1.96 billion – that number fell to $1.11 billion in 2015. In 2011 TMST posted an EPS gain of $3.68 but the following years, with one exception, saw a downtrend and in 2015 TMTS reported a loss of $1.63.

Timken Steel Corporation (NYSE:TMST) is followed by five firms. Two analysts rate the shares as a “Strong Buy”, two rate TMST as a “Hold”, and one rates the shares a “Sell”. Their consensus price target is $17.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

2/17/2017
Ticker Symbol TMST
Last Price a/o 12:15 AM EST  $                    19.45
Average Volume                    579,000
Market Cap (mlns)  $                  789.25
Sales (mlns) $861.40
Shares Outstanding (mlns) 44.54
Share Float (mlns) 35.94
Shortable Yes
Optionable Yes
Inside Ownership 0.10%
Short Float 15.43%
Short Interest Ratio 9.58
Quarterly Return 29.91%
YTD Return 14.47%
Year Return 132.85%

Build-A-Bear Workshop, Inc. (NYSE:BBW) Needs to Keep Building…

Build-A-Bear Workshop, Inc. (NYSE:BBW)

Build-A-Bear Workshop, Inc. (NYSE:BBW) was founded in St. Louis, MO in 1997. Build-A-Bear Workshop, Inc. offers an interactive make-your-own stuffed animal retail-entertainment experience. There are more than 400 Build-A-Bear Workshop stores worldwide, including company-owned stores in the United States, Canada, the United Kingdom, the Republic of Ireland and Denmark and our franchisees operated 86 stores in 14 additional countries.

History

Build-A-Bear Workshop, Inc. (NYSE:BBW) shares were trading below $4 in 2009. However, in early 2015 BBW shares broke out over $22. Today, In May of 2016 the company announced that it was exploring strategic alternatives – which usually means that the firm is looking for someone to acquire them. The news sent shares up 8% on the day. At the time, Build-A-Bear Workshop, Inc. (NYSE:BBW) was rumored to be worth around $200 million.

In October, 2016 Build-A-Bear Workshop, Inc. (NYSE:BBW) reported a 3rd quarter 104% increase in GAAP pre-tax income versus the prior year. Today Build-A-Bear Workshop, Inc. (NYSE:BBW) reported fourth-quarter earnings of $318,000. Earnings were announced at $0.39 – well below expectations of $0.69. Following the news, BBW gapped down from Wednesday’s close of $11.90 to open at $8.75 – below $10 for the first time since 2014. BBW ended trading today at $8.52 – down over 28%.

The Numbers

Build-A-Bear Workshop, Inc. (NYSE:BBW) sales have been flat for years. In 2012 sales were reported at $394.4 million and that figure was little changed in the subsequent years – 2015 sales were just $377.7 million. Earnings per share were at the worst in 2013 when Build-A-Bear Workshop, Inc. (NYSE:BBW) posted a loss of $3.02. Since then BBW EPS has improved each year and in 2015 the figure was a positive $1.61.

Three firms follow Build-A-Bear Workshop, Inc. (NYSE:BBW), two rate the shares as a “strong Buy”, one rates the shares as a “Buy”. Their consensus price target is $20.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

2/16/2017
Ticker Symbol BBW
Last Price a/o 4:00 PM EST  $                      8.52
Average Volume                      85,120
Market Cap (mlns)  $                  144.46
Sales (mlns) $371.50
Shares Outstanding (mlns) 15.45
Share Float (mlns) 14.7
Shortable Yes
Optionable Yes
Inside Ownership 0.30%
Short Float 9.14%
Short Interest Ratio 15.79
Quarterly Return -36.18%
YTD Return -32.00%
Year Return -32.93%

Southcross Energy Partners, L.P. (NYSE:SXE) Shares Pushing Back Against Analysts

Southcross Energy Partners, L.P. (NYSE:SXE)

Southcross Energy Partners, L.P. (NYSE:SXE) shares are up over 15% on heavy volumes. SXE ended yesterday’s trading at $2.26 but hit a high today of $2.74 – a 20% move. The uptick came in conjunction with volumes nearing 880k thousand shares – average daily volumes are under $200k.

Dallas, TX-based Southcross Energy Partners, L.P. (NYSE:SXE) is a master limited partnership that provides natural gas gathering, processing, treating, compression and transportation services and NGL fractionation and transportation services. It also sources, purchases, transports and sells natural gas and NGLs. Its assets are located in South Texas, Mississippi and Alabama and include two gas processing plants, one fractionation plant and approximately 3,100 miles of pipeline.

Southcross Energy Partners, L.P. (NYSE:SXE) did not fare well in 2015. SXE shares dropped from just over $20 to less than $1. In 2016, four notable financial firms downgraded the shares. However for the past quarter, SXE is up over 66%; for the past year SXE is up 276%; and for year-to-date SXE shares are up over 67%.

On January 9, 2017 Southcross Energy Partners, L.P. (NYSE:SXE) announced a change in leadership. Bruce A. Williamson, currently the Executive Chairman of Holdings and a director of the Southcross general partner, was been named President and Chief Executive Officer of both Holdings and Southcross’ general partner. Mr. Williamson has over 35 years of experience encompassing all facets of the energy value chain with Shell Oil Company, PanEnergy Corporation, Duke Energy, Dynegy, and Cleco Corporation.  He also brings a strong record of accomplishment as a CEO delivering shareholder value through transformation, restructuring, capital allocation, asset transactions and mergers.

Southcross Energy Partners, L.P. (NYSE:SXE) sales dropped from 2014 ($848.5 million) to 2015 ($698.5 million) but are still above levels experienced between 2011 and 2013. Earnings on a per share basis have been negative for the past five years with 2015 reporting a loss of $1.32.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

2/16/2017
Ticker Symbol SXE
Last Price a/o 3:22 PM EST  $                      2.66
Average Volume                    198,800
Market Cap (mlns)  $                  140.05
Sales (mlns) $554.80
Shares Outstanding (mlns) 61.97
Share Float (mlns) 10.27
Shortable Yes
Optionable Yes
Inside Ownership 0.50%
Short Float 1.40%
Short Interest Ratio 0.72
Quarterly Return 66.18%
YTD Return 67.41%
Year Return 276.67%

Protalix Bio Therapeutics, Inc. (NYSE:PLX) Market Confidence Back After Knight Therapeutics Invests

Protalix Bio Therapeutics, Inc.(NYSE:PLX)

Canadian-based Knight Therapeutics (TSX:GUD) is a specialty pharmaceutical company that acquires, licenses, and markets pharmaceuticals the company considers to be disruptive prescription pharmaceuticals. Knight also invests in life science companies with the goal of securing future distribution rights. The latter seems to be the case with Knight’s purchase of 6.2 million shares of Israel-based Protalix Bio Therapeutics, Inc. (NYSE:PLX). Knight did not directly take ownership of the shares. They were actually purchased by Abir Therapeutics. Abir is Knight’s Israeli-based, wholly owned subsidiary which also happens to own over 28% of Medison Pharma – Israel’s 3rd largest pharmaceutical company.

Protalix Bio Therapeutics Inc. is a biopharmaceutical company develops recombinant therapeutic proteins expressed through its proprietary plant cell-based expression system, ProCellEx®. Protalix’s first product manufactured by ProCellEx, taliglucerase alfa, was approved for marketing by the U.S. FDA. Protalix has licensed the world-wide development and commercialization rights to Pfizer (NYSE:PFE) – excluding Brazil. Protalix’s development pipeline includes the following product candidates: pegunigalsidase alfa, a treatment for Fabry disease, OPRX-106, an orally-delivered anti-inflammatory treatment, and alidornase alfa for the treatment of Cystic Fibrosis – as well as others.

Last week, Protalix provided the public with a 2016 review of its operations and guidance for 2017. Highlights include a $24.3 million purchase of taliglucerase alfa from the Brazilian Health Ministry for the treatment of Gaucher’s disease. Added to previous deliveries of the drug, this sale could represent $42 million in annual revenues. A Phase 2 study’s interim results for alidnorase alfa, for the treatment of Cystic Fibrosis, was encouraging. The company exchanged a $69 million, 4.5% secured convertible note due in November of 2018 for 23.8 million common shares and a $54.1 million, 7.5% secured convertible note due in 2021.

In 2017, Protalix (NYSE:PLX) expects to release full results of two Phase 2 clinical studies concerning alidornase alfa and OPRX-106. They also expect to complete patient enrollment on their Phase 3 clinical study for pegunigalsidase alfa for the treatment of Fabry disease – interim results are expected in 2018.

Two firms follow NYSE:PLX. Both rate the shares as a “Strong Buy”. In 2009, PLX shares rose over 500% and peaked at just under $13. Since then, Protalix (NYSE:PLX) has been on a relatively steady decline. Today’s price action represents an annual high. No doubt that the investment by Knight gave investors confidence in a stock that had lost some admirers.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

Michael Kors (NYSE: KORS) Drops on Same Store Sales and Guidance

Michael Kors Holdings Limited – NYSE: KORS

Michael Kors Holdings Limited released news of same store sales versus the previous comparable quarter and shares dived by more than 12% in early trading. KORS, traded on the NYSE, closed Monday trading at $41.28 and opened today at $36.13. The drop was due to their announcement of disappointing same-store sales and guiding expectations lower for their future earnings release.

Analysts had expected same store sale for the quarter ending Dec. 31, 2016 to decline 4.9% but were surprised when KORS announced a larger figure of 6.9%. Net income was $271.3 million ($1.64/share) versus expectations of $294.6 million ($1.59/share). Total revenues dropped 3.2% to $1.35 billion against analyst expectations, on average, of $1.36 billion. Additionally, KORS provided guidance of current quarter revenues in the range of $1.04 to $1.06 billion – missing street expectations of $1.11 billion.

Brick & mortar fashion retailers have taken a beating as online internet sales have been gaining strength. Kate Spade (NYSE: KATE) has gone through two analyst downgrades last month and the board is said to be exploring strategic alternatives which normally indicates that a company is on the selling block. KATE shares are down a modest 0.44% at the time of this writing.

Since 2012, KORS had been experiencing impressive earnings and sales growth. In 2012 KORS reports sales of $1.3 billion and $4.71 billion in 2016. EPS for KORS shareholders was $0.80 in 2012 but they posted a figure of $4.50 in 2016. Of the eighteen firms that follow KORS, fifteen assign the shares a rating of “Hold”, two rate the shares as a “Strong Buy”, and one rates it as a “Sell”.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

2/7/2017
Ticker Symbol KORS
Last Price a/o 1:15 PM EST  $                    36.46
Average Volume                2,600,000
Market Cap (mlns)  $              6,760.00
Sales (mlns) $4,670.00
Shares Outstanding (mlns) 163.73
Share Float (mlns) 157.46
Shortable Yes
Optionable Yes
Inside Ownership 2.80%
Short Float 7.93%
Short Interest Ratio 4.79
Quarterly Return -14.43%
YTD Return -3.96%
Year Return -20.37%